A consortium of major US and European financial institutions is lining up a bid for London-based derivatives clearing house LCH.Clearnet. Deutsche Bank is acting as adviser on the acquisition, as well as being part of the bidding group.

An official representing the transatlantic consortium told Risk the group also includes BNP Paribas, Société Générale, UBS, JP Morgan, HSBC and Royal Bank of Scotland, along with interdealer broker Icap, which confirmed its involvement on February 2.

He added a small number of other major banks are also involved, with more firms interested in participating, but declined to give names.

Increased market turbulence and counterparty risk concerns have pushed clearing services into the spotlight since the early part of last year. In particular, regulators in Europe and the US view central clearing for credit derivatives as critically important for financial stability.

LCH.Clearnet has 109 clearing members and is 73.3% user owned, but the group wants the clearing house to be owned and run by a smaller number of active players.

Additionally, the consortium wants to break up a non-binding merger agreement for LCH.Clearnet signed on October 22, 2008 with US clearing giant, the Depository Trust & Clearing Corporation (DTCC). Concerns have been raised that a merger of the US and UK firms would stifle competition in the clearing space.

To date, no formal bid or timeframe has been set by the consortium. However, any proposition would need to be greater than the price agreed with the DTCC, which gave LCH.Clearnet an implied equity value of €739 million, or up to €10 a share. That deal is due to be completed on March 15, unless a counter offer is made.

A quant at Citi has revived debate about the changing nature of the profession (www.risk.net/2417747). The scope is narrower, he claims; the job has been dumbed down, and today's quants are little more than programmers. Is he right?